US CPI Preview: Forecasts from 10 major banks, monthly pace should hold at 0.2%

The US Bureau of Labor Statistics (BLS) will release the most important inflation measure, the US Consumer Price Index (CPI) figures, on Thursday, August 10 at 12:30 GMT. As we get closer to the release time, here are the forecasts by the economists and researchers of 10 major banks regarding the upcoming United States inflation print for the month of July.

Headline and core CPI, which excludes volatile food and oil prices, are seen coming in at 0.2% month-on-month, same as in June. Annual headline CPI is expected to rebound to 3.3% vs. June’s print of 3.0% and core is seen steady at 4.8% YoY.  

Commerzbank

We expect the core rate to remain at just 0.2% in July. The headline inflation rate is also likely to be 0.2%. As this would be largely in line with the Fed's inflation target of 2%, such a result would support our view that the Fed is unlikely to raise rates again.

Credit Suisse

We expect core CPI inflation to remain at 0.2% MoM in July, maintaining a more modest run rate after stepping lower in June. The YoY reading of core inflation is likely to decline to 4.7%. On the other hand, unfavorable base effects and modestly higher gas prices are likely to lead headline inflation higher to 3.3% YoY. A reading in-line with our expectations would represent the second consecutive month that monthly core inflation has been broadly in-line with the Fed’s target.

TDS

Core-price inflation likely remained the same in July, printing a second straight 0.2% MoM gain (0.23% unrounded). Goods inflation was likely a big factor to the downside, with shelter prices remaining a key wildcard (we expect modest acceleration). Rising gas prices will also help to keep headline inflation steady. Our MoM forecasts imply 3.3%/4.8% YoY for total/core prices.

ANZ

We expect both headline and core CPI inflation to rise by 0.2% MoM in July. Falling used car prices are again expected to see a decline in core goods prices. Some one-off factors are expected to keep core services ex-rent subdued, while rent inflation should continue to cool from a heady pace. Our diffusion and dispersion indices suggest inflation pressures are abating and normalising. The Fed is wary of upside risks to elevated inflation given demand for labour remains excessive. Most policymakers think the policy rate will need to be kept restrictive for some time to get inflation back to target. The risks remain that the Fed’s work is not yet done.

NBF

The energy component is likely to have had a sizeable positive impact on the headline index given the sharp rise in gasoline prices during the month. This, combined with another healthy gain in shelter costs, should result in a 0.4% increase in headline prices. If we’re right, the year-on-year rate could move up from 3.0% to 3.4%, marking the first increase in 13 months for this indicator. The advance in core prices could have been more subdued in July thanks in part to a decline in the price of used vehicles. But a rise of 0.3% in the month will still be too large to allow a drop in the annual rate. The latter should instead remain unchanged at 4.9%.

RBC Economics

YoY growth in US consumer prices likely ticked slightly higher for the first time in a year in July – gasoline prices didn’t move much this July but a larger 8% drop in July a year ago will fall out of the 12-month growth rate. YoY growth in core (ex-food & energy) prices will still be high (we expect +4.7%) in July, but we expect a moderate 0.2% MoM increase to match the June gain. Slower growth in core CPI has come alongside a pullback in home rent inflation as earlier slowing in market asking rent growth feed through to lower rent CPI with a lag as contracts get renewed. Absent a reacceleration in core inflation, we expect the Fed to step to and stay on the sideline and maintain the Fed Funds at 5.25% – 5% range until 2024.

CIBC

After some relief in core prices in June, price pressures likely maintained a 0.2% monthly pace in July for both headline and core (ex. food/energy) CPI. Unfavorable base effects will have propped up annual CPI inflation to 3.2%, while annual core inflation likely subsided to 4.7%. Within core categories, shelter prices could have decelerated, reflecting the typical lag associated with softer rents seen last year, but the Fed will be focused on core services outside of rent of shelter, as that’s a better gauge of underlying price pressures tied to demand. That measure was flat on a monthly basis in June, but that partly reflected a sizable drop in airfares that may not have extended into July. Still, even a bounce in core services ex. shelter to 0.3% MoM would leave the three-month annualized change at a tame 2.1%. 

Citi

We expect a 0.196% MoM increase in core CPI in July, a modestly stronger increase than in June but clearly a much more favorable monthly pace of inflation for the Fed than over much of the last few years. Shelter prices are likely to continue to slow overall this year, though the July data may see a somewhat stronger 0.47% MoM increase in each of primary rents and owners’ equivalent rent. More negative seasonal factors after July could mean shelter prices slow further in the fall. Meanwhile, headline CPI should rise 0.3% MoM and rebound from a near-term bottom of 3.0% YoY to 3.3% YoY.

Westpac

The June CPI report was pivotal for the current cycle as a modest 0.2% monthly print brought annual headline inflation down to 3.0%, a third of its peak level. A similar outcome is expected by Westpac, though the annual rate will lift slightly owing to an adverse base effect. The composition of US inflation remains problematic, however. Goods inflation is benign and services ex. shelter increasingly constructive for a return to target well before the medium term. But, because of its weight and scale, by itself, shelter inflation has the capacity to hold inflation above the 2.0% YoY target for the foreseeable future. It is also worth recognising that, while shelter inflation should abate to year-end and through early-2024, capacity in the sector will remain a concern for years, and with it shelter inflation.  

Wells Fargo

We expect the disinflationary trend to continue in July and estimate a 0.2% bump in both the headline and core measures over the month. Looking under the hood, we expect faster deflation for vehicles and other goods in July, counteracted by slightly firmer services prices for travel and medical care. If realized, these prints would translate to a 3.3% annual headline rate and a 4.7% annual core rate. Through the monthly noise, inflation appears set on a downward path. However, progress in the coming months is likely to be slower and noisier than June’s print alone would suggest. We expect monthly gains in core inflation to pick up slightly in Q4 as the disinflationary momentum from waning goods prices fades and health insurance prices rebound toward the end of the year.